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Safeguarding Your Income

This article was written by in Career and Work. 14 comments.


When it comes to financial success, your most important tool is your income. Without an income you can’t pay the bills, reduce your debt, or even buy the simple things you need to survive. With a properly maintained income, however, nothing is impossible. No matter what your personal financial philosophy, an income is one thing you can’t do without.

One the first things I learned about personal finance that has always stuck with me is the idea that risk is having only one source of income. I don’t remember where I read that little nugget of wisdom, but anyone can see the sense of it. The more places you have money coming from, the less likely you are to sink your financial boat.

Protecting your income streams can help you maximize your earning ability and simplify your life. Here are some of the things I’ve learned over the past few months:

Come to grips with your return on investment

It’s a good idea to know how you’re spending your time and how much money you’re making. An interesting exercise involves dividing up a week (or a month) into the different activities you spend your time on, and coming up with percentage of the total time spent. You don’t need to count sleeping or eating or relaxing, just focus on the things you do that make money (or have the potential to make money).

Once you’ve got your percentages figured out, calculate how much money you’ve made from each source. Your chart might look something like this:

  • Job: 70% Time, 80% Income
  • Hobby 1: 10% Time, 3% Income
  • Hobby 2: 8% Time, 15% Income
  • Side Job: 12% Time, 2% Income

After you’ve done this, it’s easy to see where your money-making time can be most effectively spent. Hobby 1 and the Side Job are taking up a lot of time, but aren’t necessarily making any money. Does this mean you should stop doing them? No! Of course not. Hobbies are great. You may, however, want to stop counting on them as sources of income. If you wanted to make more money, you could devote that extra time to Hobby 2, which appears to have some serious money making power.

This can be a tough exercise. Your hobbies and businesses on the side are usually things you’ve put a lot of thought, sweat and love into. You’ve got a lot of personal equity in the project, and deciding you’re just going to do it for fun kind of feels like giving up. You’re not completely giving up though, and you can always keep trying to change and improve it.

Anticipating change

Is there a pink slip coming your way? Are your contracts drying up? Start looking for another way to make money. So many people get stuck in between income sources and their problems snowball. Your job can be extremely enjoyable, a source of pride and joy, and even part of your identity, but don’t forget that at its core, it is a way to make money. It can be difficult to move on.

I’m at a position right now where I’m finally planning on leaving an internship where I’ve been for two years. I’ve got a lot of great memories there, and will miss out on some awesome perks. A new and better opportunity has come along, though and no matter how I’m tied to my old job, I can’t miss out on what the future holds.

Controlling spending

While income is important, wealth isn’t how much you make, but how much you save. Your income will be much more powerful if a lot of it gets to hang around in your high-interest checking account or some sweet mutual funds or an IRA. Lifestyle inflation can suck the power right out of a raise, so it’s important to remember that as you make more money, you should keep more as well. Spending smart is an important step to take.

Being proactive and finding new ways to maximize your money-earning time, plan for problems, and keep more of what you earn will help maximize your income and realize more of the benefits that come from the money you’re earning and maximize your income.

What are some of the things you do to make the most of your wages?

Updated December 22, 2011 and originally published July 16, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Jeff is an aspiring advertising professional with goals to start his own business. He is a reformed saver who blogs regularly at Stretchy Dollar in addition to his weekly column at Consumerism Commentary. View all articles by .

{ 7 comments… read them below or add one }

avatar Eric @ FPP.COM

Great post Jeff. I think the advice of having more than one income source is echoed in a lot of places. One of the places I first read it was in The Millionaire Next Door, which is an all-time favorite for me, even to this day.

I think another definition of risk is having no ability to go out in the market somewhere and earn a living on your own – through your own skills or by having a solid network to leverage off of. Where so many people get caught unaware is when they get the pink slip and haven’t prepared in advance.

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avatar Matt Jabs

All great points. Love the quote, “wealth isn’t how much you make, but how much you save.”

I do not make a ton of money from my side income… YET! So I rely on another consideration, namely the long-term benefit of sustained progress toward my side income. It may not be earning now, but if you keep at it… the payoff could be amazing. :-)

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avatar Beth Dargis

What great ideas. I have multiple sources of income and don’t always have an idea of how much is coming from where percentage wise.

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avatar jason

I have never really thought about making a chart like that. That is definitely a good idea. That way I know how my time is divided and where income comes from. Good points.

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avatar Luke Landes ♦127,386 (Platinum)

Interesting concept. For me, I’m looking at something like:

  • Job: 50% time, 30% income
  • Side job: 48% time, 70% income
  • Hobbies: 2% time, 0% income (more outflow, actually)

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avatar Enrique S

My job is currently my primary source of income. I say currently, because just like Matt, I’m working on building my side income until I’m financially independent.

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avatar Matt Jabs

AMEN Enrique!

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